Adaptec Announces Third Quarter Earnings; Revenue up 28% sequentially
Business Wire - January 25, 1999 16:32
MILPITAS, Calif.--(BUSINESS WIRE)--Jan. 25, 1999--Adaptec, Inc. 6 (NASDAQ:ADPT) released its fiscal year 1999 third quarter results for the period ending December 31, 1998. Strong demand for its host bus adapter products, a significant RAID design win, and overall expense reductions paved the way for a healthy quarter.
Revenue for the third fiscal 1999 quarter was $183.9 million. Net income and diluted earnings per share were $26.7 million and $0.24, respectively.
Excluding the results from the Peripheral Technology Solutions group (PTS), which was recently sold in parts to STMicroelectronics and Texas Instruments, net revenues were $159.6 million in the third quarter, down 17.9% from $194.4 million in the third quarter of fiscal 1998, and up 34.9% sequentially from $118.3 million in the second quarter of fiscal 1999. Net income was $29.2 million, down 13% from $33.6 million excluding unusual charges and a change in accounting principle a year ago, and up from $3.8 million excluding unusual charges last quarter. Diluted earnings per share were $0.26, down from $0.28 for the third quarter of fiscal 1998 excluding unusual charges and a change in accounting principle, and up from $0.03 for the second quarter of fiscal 1999 excluding the effect of unusual charges in that quarter.
"We are pleased with the achievements the entire Adaptec team has accomplished to deliver these results," said Larry Boucher, interim CEO of Adaptec. "We believe we are positioned for long-term profitable growth, especially on the server side of our business."
"Our expense reduction program also proceeded more rapidly than we originally expected," added Andy Brown, vice president and CFO of Adaptec. "The keys to our future success are continued execution on works in progress, strong customer relationships, software expertise, and brand equity."
Trends of the Quarter
Continued demand for host bus adapters was fueled by server growth, driven largely by the demands of Internet computing. E-business, online publishing, and online trading/brokerage, for example, all require powerful I/O to move data quickly, reliably, and on demand "24x7" where it is needed. On the technology front, Adaptec was the first to demonstrate a working Ultra160/m host bus adapter (Comdex, November 1998), and is working closely with hard disk manufacturers, who will debut Ultra160/m drives concurrently with Adaptec shipments, providing a ready market for the Adaptec product.
The company's AAC-364 64-bit RAID adapter (formally announced January 6, 1999) is the industry's first true 64-bit RAID controller. Embraced by Dell and incorporated into its new PowerEdge servers and PowerVault storage products during the quarter, the AAC-364 is the industry's flagship performer, and heralds a new era of RAID development and focus at Adaptec.
Sophisticated RAID and SCSI products are being differentiated more by software features and functionality than by hardware, and server performance is heavily influenced by the value Adaptec software adds. At the desktop, Adaptec's CD-RW software is the de facto industry standard, and Adaptec expects to leverage its CD-RW expertise into future DVD products.
Over the last five months Adaptec divested itself of non-core businesses with the sale of peripheral technology solutions to STMicroelectronics; sale of high-end peripheral technology solutions to Texas Instruments Incorporated; the formation of BroadLogic Inc. as an independent satellite networking technologies company; the transfer of certain Fibre Channel technologies and assets to Jaycor Networks, Inc. (JNI) in return for an equity stake in JNI; and the transfer of certain external storage technologies and products to Chaparral Technologies, Inc. (CTI) in exchange for an equity stake in CTI.
Safe Harbor Statement
The statement in this press release regarding the company's belief that it is positioned for long-term profitable growth is a forward-looking statement that is subject to risks and uncertainties. Actual results could differ materially for various reasons, including failure of the market for the company's products to grow at the rates anticipated by the company, actions by competitors that increase their market shares at the expense of the company, including the introduction of new, more competitive products and the development and commercialization of competing technologies, and the inability of the company to control its costs. For a more detailed discussion of the factors that affect the company's operating results, interested parties should review the company's SEC reports, including Adaptec's Annual Report on Form 10-K for the fiscal year ended March 31, 1998, and Quarterly Reports on Form 10-Q for the quarter ended September 30, 1998.
Conference Call Information
Investors will have the opportunity to listen to the conference call over the Internet through Vcall at vcall.com. To listen to the live call beginning at 2:00 p.m. PST, please go to the Web site at least fifteen minutes early to register, download, and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available shortly after the call for a period of one week. Calling 800-633-8284 and referencing reservation No. 11098460 after 5:00 p.m. PST on January 25th, 1999 can also access the conference call replay.
About Adaptec
Adaptec moves the world's information with host bus adapter, RAID, and software products that speed information to and from computers, peripherals, and networks. Founded in 1981 and with headquarters in Milpitas, Calif., Adaptec is a global design, manufacturing, sales, service and distribution company. More information on Adaptec and its products is available at adaptec.com.
Adaptec, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
Pro Forma (1)
Three Month Three Month
Period Ended Period Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1998 1997
(in thousands, except per share data)
Net revenues $ 183,872 $ 254,163 $ 159,606 $ 194,393
Cost of revenues 74,719 95,304 56,752 63,174
Gross profit 109,153 158,859 102,854 131,219
Operating expenses:
Research and
development 35,156 45,782 27,267 34,447
Sales, marketing
and administrative 41,834 63,312 39,986 658,386
Write-off of acquired
in-process
technology -- -- -- --
Restructuring and
other charges -- 5,187 -- 3,500
Total operating expenses 76,990 114,281 67,253 96,333
Income from operations 32,163 44,578 35,601 34,886
Interest income 7,916 9,375 7,916 9,375
Interest expense (2,992) (3,026) (2,992) (3,026)
Income from operations
before provision for
income taxes 37,087 50,927 40,525 41,235
Provision for income
taxes 10,385 14,852 11,348 11,727
Income before cumulative
effect of change in
accounting principle 26,702 36,075 29,177 29,508
Cumulative effect of a
change in accounting
principle, net of tax
benefit -- (9,000) -- (9,000)
Net income $ 26,702 $ 27,075 $ 29,177 $ 20,508
Net income per
common share:
Basic
Income before
change in accounting
principle $ 0.25 $ 0.32 $ 0.27 $ 0.26
Cumulative effect of
change in accounting
principle -- (0.08) -- (0.08)
Net income $ 0.25 $ 0.24 $ 0.27 $ 0.18
Diluted
Income before
change in accounting
principle $ 0.24 $ 0.30 $ 0.26 $ 0.25
Cumulative effect of
change in accounting
principle -- (0.07) -- (0.08)
Net income $ 0.24 $ 0.23 $ 0.26 $ 0.17
Shares used in
computing net income
per share:
Basic 108,040 113,666 108,040 113,666
Diluted 110,881 124,444 110,881 119,992
(1) Excludes revenue and expenses from the Peripheral Technology
Solutions (PTS) business. The high-end business was sold to Texas
Instruments, Inc. on November 24, 1998 and the mainstream
business was sold to STMicroelectronics, Inc. on January 15,
1999.
Adaptec, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
Pro Forma (1)
Nine Month Nine Month
Period Ended Period Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1998 1997
(in thousands, except per share data)
Net revenues $ 508,424 $ 803,693 $ 423,633 $ 599,167
Cost of revenues 217,544 307,328 158,244 199,021
Gross profit 290,880 496,365 265,389 400,146
Operating expenses:
Research and
development 119,970 126,881 90,805 91,674
Sales, marketing
and administrative 134,661 164,291 126,603 153,390
Write-off of acquired
in-process
technology 65,762 -- 39,382 --
Restructuring
and other charges 62,187 6,715 62,187 3,500
Total operating
expenses 382,580 297,887 318,977 248,564
Income (loss)
from operations (91,700) 198,478 (53,588) 151,582
Interest income 24,961 24,775 24,961 24,775
Interest expense (9,106) (9,116) (9,106) (9,116)
Income (loss) from
operations before
provision (benefit)
for income taxes (75,845) 214,137 (37,733) 167,241
Provision (benefit)
for income taxes (974) 55,654 2,063 43,228
Income (loss) before
cumulative effect of
change in accounting
principle (74,871) 158,483 (39,796) 124,013
Cumulative effect of
a change in accounting
principle, net of tax
benefit -- (9,000) -- (9,000)
Net income (loss) $ (74,871) $ 149,483 $ (39,796) $ 115,013
Net income (loss)
per common share:
Basic
Income (loss)
before change in
accounting principle $ (0.67) $ 1.40 $ (0.36) $ 1.10
Cumulative effect of
change in accounting
principle -- (0.08) -- (0.08)
Net income $ (0.67) $ 1.32 $ (0.36) $ 1.02
Diluted
Income (loss) before
change in accounting
principle $ (0.67) $ 1.34 $ (0.36) $ 1.04
Cumulative effect of
change in accounting
principle -- (0.07) -- (0.07)
Net income $ (0.67) $ 1.27 $ (0.36) $ 0.97
Shares used in computing
net income (loss)
per share:
Basic 111,274 112,868 111,274 112,868
Diluted 111,274 122,919 111,274 119,057
(1) Excludes revenue and expenses from the Peripheral Technology
Solutions (PTS) business. The high-end business was sold to Texas
Instruments, Inc. on November 24, 1998 and the mainstream
business was sold to STMicroelectronics, Inc. on January 15,
1999.
Adaptec, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
December 31, 1998 March 31, 1998
(In thousands)
ASSETS
Current assets
Cash and marketable securities $655,554 $697,382
Accounts receivable, net 80,357 136,476
Inventories 48,600 71,297
Prepaid expenses and other 108,674 85,939
Total current assets 893,185 991,094
Property and equipment, net 185,551 194,798
Other assets 38,439 89,337
$ 1,117,175 $ 1,275,229
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ -- $ 850
Note payable -- 17,640
Accounts payable 36,945 48,047
Accrued liabilities 78,778 73,947
Total current liabilities 115,723 140,484
Convertible subordinated notes 230,000 230,000
Stockholders' equity
Common stock 108 114
Additional paid-in capital 236,847 295,263
Retained earnings 534,497 609,368
Total stockholders' equity 771,452 904,745
$ 1,117,175 $ 1,275,229
CONTACT: Adaptec, Inc.
Sandra O'Halloran, 408/957-2505 (IR)
sandyoh@corp.adaptec.com
or
Eric Brown, 408/957-1758
ebrown@corp.adaptec.com
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